The more expensive interest-only loans which incur higher interest rates will be the focus of the review, with eight of the major lenders required to provide remediation to any consumers found to be in financial difficulty as a direct result of the loans.
“Home loans are the biggest financial commitment most people will ever make. In assessing whether borrowers can meet loan repayments without substantial hardship in the short and longer term, it is important that lenders can collect and rely on information which provides an accurate view of the consumer’s financial situation [especially] when interest rates are at record-low levels,” ASIC deputy chairman Peter Kell said.
As part of the investigation, ASIC said it will identify and target brokers and lenders who recommend a high volume of the loans, warning that for the vast majority of owner-occupiers, interest-only loans don’t make financial sense.
“Lenders and mortgage brokers must also ensure that consumers are being provided with the home loan product that meets their needs. Lenders and mortgage brokers need to think twice before recommending that a consumer obtain a more expensive interest-only loan,” Mr Kell said.
The new surveillance will build on ASIC’s 2015 review which prompted eight lenders to assess borrowers’ different expenses in their appraisal of their loan suitability.
It comes as borrowers face increasing pressuring with APRA last week announcing stricter lending restrictions.